Poor housing affordability to underpin high rental demand

Despite predictions of slower rental growth this year, demand is likely to remain strong due to poor housing affordability across Australia's capital cities.

According to a report by BankWest, only 1 Australian capital city out of 8 is affordable for key public sector workers. It found that more than three quarters (78%) or 116 out of 148 of local government areas (LGAs) in national capital cities were unaffordable for all key workers.

"Our research shows that key workers are still doing it tough across Australia with most being locked out of the property market in the city they serve," says Ian Corfield, Bankwest Retail Chief Executive.

Owning a home in the city they serve remains an unattainable dream for Australia's struggling emergency workers and teachers, the survey found. And despite marginal improvement with home prices falling 2% nationally, these workers faced significant hurdles in purchasing their own homes.

"The unfortunate reality is many are locked permanently in the rental market and are unlikely to get the keys to their own home while others have to commute for hours," says Corfield.

Unaffordable: Aussie Capitals Too Expensive

City

Affordability

Price to earnings ratio

Median house price (Mar 2009)

Sydney

Unaffordable

7.7

$564,500

Melbourne

Unaffordable

6.5

$478,000

Perth

Unaffordable

6.3

$462,500

Canberra

Unaffordable

6.2

$457,000

Darwin

Unaffordable

6.2

$453,000

Brisbane

Unaffordable

6.0

$439,500

Adelaide

Unaffordable

5.1

$373,500

Hobart

Affordable

4.8

$354,500

Note: price to earnings ratio is the multiple of a workers annual salary that equates to the median house price. A ratio of 5.0 or more means housing is unaffordable.
Data source: Bankwest

Underscoring negative affordability figures is the fact that they show a marked deterioration over the past five years. In 2004, workers could not afford to buy into 70% of LGAs, compared to almost 80% in 2009. Concern centres on whether the next five years will see even further deterioration in housing affordability for essential workers.

"It is hard to know what the market will do, especially as we are in such a turbulent time," says Paul Vivian, Head of Mortgages & Savings, Bankwest. "I wouldn't anticipate affordability to deteriorate at the pace that it has over the past five years. However, much improvement is unlikely. Unprecedented low interest rates at the moment though, have created some momentum in the housing market."

Home units were found to be more affordable than houses, however the survey highlighted that median unit prices were still unaffordable in 34% of LGAs in Australian capital cities. Unlike housing, this has shown only a marginal decline since 2004, when 33% of LGAs were unaffordable for unit buyers.

Affordability Worse for Nurses, Best for Cops

Worker

Capital City LGAs They Could Afford

Affordability:
Sydney Benchmark

Affordability:
Melbourne Benchmark

Average Annual Earnings

Nurses

2% of all cities

11.3

9.7

$51,553

Teachers

5%

10.1

9.2

$55,029

Ambulance Officers

9%

9.1

8.1

$63,414

Fire-fighters

10%

11.2

7.5

$50,471

Police Officers

22%

7.7

6.5

$73,237

Source: Bankwest

In terms of workers, police officers showed equal best or best affordability at around 22% of capital city LGAs, whilst nurses faced the most difficulties with around 2% of LGAs being affordable. Less than 5% of LGAs were affordable for teaches, around 10% for fire-fighters, and 9% for ambulance officers.

"The main reason that so many areas are unaffordable for emergency workers and teachers is because house prices nationally have risen at a much faster rate over the past five years than the salaries of these workers," says Vivian.

Unfortunately for workers on an average income, the outlook for home affordability in Australia's capital cities is not promising, at best expected to remain around current levels, at worse, to show further deterioration over time unless real wages can catch up to the growth in property prices.

Top Least / Most Affordable Local Government Areas by City

UNAFFORDABLE - Local Government Areas:

Sydney

Melbourne

Perth

Brisbane

Adelaide

Hobart

Canberra

Darwin

Mosman

Stonnington

Peppermint Grove

Brisbane

Walkerville

Hobart City

South Canberra

Darwin

Woollahra

Boroondara

Cottesloe

Gold Coast

Burnside

Woden Valley

Palmerston

Hunters Hill

Port Philip

Nedlands

Beaudesert

Unley

North Canberra

Litchfield

Waverley

Bayside

Claremont

Redland

Norwood
Payneham
St Peters

Weston Creek

North Sydney

Glen Eira

Mosman Park

Pine Rivers

Adelaide

Gungahlin

AFFORDABLE - Local Government Areas:

Sydney

Melbourne

Perth

Brisbane

Adelaide

Hobart

Canberra

Darwin

Campbelltown

Melton

Kwinana

Ipswich

Playford

Derwent Valley

Tennant Creek

Wyong

Wyndham

Armadale

Logan

Salisbury

Brighton

Katherine

Penrith

Hume

Gosnells

Gawler

Sorell

Alice Springs

Wollondilly

Cardinia

Onkaparinga

Glenorchy City

Blacktown

Frankston

Tea Tree Gully

Kingborough

Note: where there are less LGAs in this table it means there is a limit to what is available. For example in the ACT there were no affordable LGAs at all for sampled workers.
Data source: Bankwest

About the Report
The Bankwest Key Worker Housing Affordability Report tracks housing affordability for five core public sector employees (covering some 480,000 people): nurses; teachers; police officers; fire-fighters; and ambulance drivers. 554 local government areas are covered and classified as unaffordable if the median housing price is greater than five times annual salary. This is the second year the report has been produced.

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